When a company bids or contracts to perform a service or develop a product for a customer, it is often necessary to estimate the number of part-time and full-time project team members that will be required. Generally, a rudimentary method is used to determine the team size, by estimating the number of required Full Time Equivalents (FTEs) as the total amount of effort needed in hours divided by the duration of the project months and the number of FTE work hours in a month. The resulting FTE figure is the estimated number of FTEs needed to be working each month, which can then be satisfied by full-time employees, part-time employees, or a combination of these.
These types of calculations are necessarily inaccurate since they cannot take into account many other factors that may affect the result, including the skill set and structure of the team, the efficiency of work and communications, and many other factors. Often, the projects fail because these kinds of efforts are not considered.
In fact, a typical approach in project management has been to try to account for the collaboration overhead by adjusting the estimate based on a “gut” feel of what more may be required using a percentage of the original estimate as additional overhead, another approach that is typically inaccurate and inconsistent. Further, most generalized estimations fail to consider or account for a significant source of inefficiency.